ust when signs point to easing inflation worldwide, China’s economic reopening after years of strict pandemic controls is raising questions about whether it could spur costs higher again.
Many economists aren’t too worried, but say the initial uncertainty will complicate matters for the Federal Reserve and other central banks that have been raising interest rates to fight inflation by slowing economic growth.
China will likely consume more energy as its economy recovers, putting upward pressure on prices of oil and other commodities. At the same time, however, its reopening could ease supply-chain bottlenecks and enable factories to boost production, resolving some problems that contributed to higher inflation in 2022.
The two effects could offset each other over time, but the cross currents could give central banks a reason to keep rates higher for longer while they monitor China’s impact, even as other parts of the world flirt with recession.
[As the Chinese have already set 20% higher oil import goals, I’d say they’ve got a great start on making things worse. ~ Beege]
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